* From growth to productivity, from PE to FCF Yield
Growth has been easy to achieve in the past decade: store footprint, price, and mix have been the drivers to capture booming demand and mechanically grow profits. This was helped by demographics in China and emerging markets. Today, the luxury market is more competitive and crowded, demand has moderated, and consumers are less predictable. However, luxury brands have opportunities to improve productivity in stores, leading to unprecedented cash generation, hence our refocus on EV and FCF metrics. Productivity, cash flow, and valuation metrics identify LVMH (Buy), Richemont (from Hold to Buy), and Prada (from Hold to Buy) as the names with the greatest potential.